REAL ESTATE NEWS

The ongoing government shutdown is creating more pain for California homebuilders.

In fact, Gary Mkrtichyan, founder of Opus Builders, told GlobeSt.com that the Army Corps of Engineers could have fallen behind on the cleanup of construction projects, and recent heavy rainfall in Southern California has made builders skittish about mudslides.

Addressing mudslide damage and recovery typically falls on the government agency.

Worse yet, the Environmental Protection Agency is unable to sign off on permit applications for developers seeking to build on busy streets. This is on top of ongoing challenges created by tariffs on key materials.

Opus Builders is working on 12 houses in the Altadena, Calif., area, as well as five in Los Angeles — and is feeling the burden, as a result.

“There’s a lot of government bureaucracy that is slowing things down,” Mkrtichyan said.

Processes, such as bringing utilities hookups to the properties or bringing them to worksites that enable construction work to begin, are delayed, he said.

“I have three homes going up on a large plot in Hollywood and need to get a fire hydrant moved because it was in the wrong location, but the Los Angeles water authorities were not responding, and I’m being told it’s due to the shutdown,” Mkrtichyan said.

Dating back many months, there’s been a surge in demand for lumber, Mkrtichyan said.

“Tariffs have been a big factor in that,” he highlighted. “Some of the bids that I put in eight or nine months ago for lumber are now showing prices that are 20% to 30% higher, and they keep going up."

“I do the best I can to get the cheapest prices, but as a business, there’s a thought that you want to wait and see about purchasing because who knows, when things get sorted out, the prices might come down.”

Mkrtichyan said these delays and complications mean that his investors are having to carry their loan payments longer, with them costing $20,000 a month. Plus, one had to hire 24-seven security for the construction site at about $1,500 a week.

Meanwhile, Pierre E. Debbas, Esq., founding partner of Romer Debbas, LLP, told GlobeSt.com that he believes the government shutdown has not affected the commercial real estate market at all.

“Investors know this will be temporary and are more concerned with the continuation of interest rate cuts and still maintain confidence that we are headed in the right trajectory,” the New York-based real estate attorney said.

Military Families Facing Hardship

Additionally, military service members in California are facing financial hardship from the government shutdown. The Golden State has the largest population of this group in the country, according to Philip Rizzo, CEO of Liberty Military Housing.

Due to frequent deployments and station changes that are standard for military life, approximately 60% to 70% live in rental housing, either in privatized military housing or off-base and rely on their Basic Allowance for Housing (BAH) to cover rent and utility costs.

Liberty Military Housing is home to major bases such as Camp Pendleton and others in San Diego. Its offices remain open, and its teams are maintaining service, maintenance and community support to its residents.

“With the current Government shutdown potentially affecting the distribution of essential benefits, many military families may face an unexpected and stressful financial burden,” Rizzo told GlobeSt.com.

“Housing providers across the country have an opportunity to step up during this time and help ensure that those who serve our nation aren’t penalized because of an interruption in pay. Liberty Military Housing is committed to standing by our residents, assuring our residents that they will not incur any late fees or penalties due to non-payment as a result of not receiving their BAH, and rent will not be due to bring their account current until BAH allotments are reinstated and received."

Source: GlobeSt/ALM